Menu Close

Redlands Passenger Rail Project cost facts and myths; Mayor Pro Tem

redlandsdailyfacts.com

A Reader Says: Redlands Passenger Rail Project cost facts and
myths
Redlands Passenger Rail Project cost facts and myths
Over the past few weeks, I have been bewildered by the difference in the cost of the Redlands Passenger Rail Project
(RPRP) expressed by the San Bernardino Associated Governments (SanBAG) and the one by the Inland Empire
Transit Alliance (IETA).
SanBAG’s documented figures show the total project cost to be $242 million for construction, plus $77 million in
financing costs. This is very similar to how the cost of a home remodel or construction project is calculated – the
actual amount of the construction loan plus the financing charges for the loan.
IETA reports the total cost to be $436 million for the loan plus the $77 million in financing.
How is the IETA group coming up with a number that is nearly twice the actual amount as documented by SanBAG?
I believe I have uncovered the error in their methodology.
The $242 million represents the budget for the project set by SanBAG using its planning, analysis and transportation
expertise.
The budget however, is not the actual expenditure.
Let’s think of the RPRP budget as you would a home construction or remodel project. The project budget is based on
what the contractor determines it will take to accomplish the project. Then the homeowner must secure the money to
fund the project based on the budget. Banks are one of several common sources used to obtain funds up to the
budget amount.
In the case of the RPRP, SanBAG has identified various sources for the funds needed to pay for the project. The
sources include a variety of federal, state and local grants and loans, including Measure I, the half-cent sales tax
approved in 2004 by more than 80 percent of the voters in San Bernardino County. Some of the project funds are
borrowed in the form of a bond that is secured by future Measure I funds (i.e., $77 million in financing mentioned
above). These are all common sources of funding used by government entities throughout the country to implement
infrastructure construction projects.
IETA has taken the stance to describe the RPRP budget as an “additional” cost, which results in their cost
calculations combining the dollar amount of the RPRP budget with the dollar amount of the funds being obtained to
pay for it.
That’s just not accurate.
In one column you have the budget figure and in the next column you have the dollar amount of the funds acquired to
meet the budget and pay for the project. Accounting guidelines seek to create a zero balance between the two
columns.
IETA seems to be adding the numbers together, creating an over-inflated representation of the costs by counting
those resources twice.
Advertisement
Critical views are part of any public project process, and rightly so.
It is unfortunate IETA has chosen to spread myths and disinformation in an attempt to gain support for their position.
Perhaps they just don’t understand basic accounting principles. Either way, the information they are sharing is just not
correct.
In the meantime, I will continue to set the record straight as necessary.
— Jon Harrison, mayor pro tem, Redlands

http://www.redlandsdailyfacts.com/opinion/20150601/a-reader-says-redlands-passenger-rail-project-cost-facts-and-myths

What Do You Say ?

This site uses Akismet to reduce spam. Learn how your comment data is processed.